US Unemployment Rate Falls To 49-Year Low Of 3.7 Percent

Kenny Grant
October 7, 2018

"The weaker gain in payrolls in September may partly reflect some hit from Hurricane Florence", said Michael Pearce, senior USA economist at Capital Economics in NY. July's numbers were revised up to 165,000 jobs from the previous estimate of 147,000; at the same time August's job number was revised up to 270,000 from the initial estimate of 201,000. The unemployment rate is forecast falling one-tenth of a percentage point to 3.8 percent, an 18-year low first hit in May.

The US central bank raised rates last week for the third time this year and removed the reference in its post-meeting statement to monetary policy remaining "accommodative".

US financial markets were little moved by the report. Over the course of this year, recruiters have been more open to job candidates they may before have overlooked, such as those with criminal histories. "It's going to reinforce the Fed's path for raising rates".

And when the government issues its September employment report Friday, expectations are high for another sunny picture of the job market. Data-collection rates were within normal ranges for both surveys.

Payrolls are calculated from a survey of employers, which treats any worker who was not paid for any part of the pay period that includes the 12th of the month as unemployed.

An Institute for Supply Management (ISM) survey of manufacturers published Tuesday showed factory activity retreated from a 14-year high in September. The storm struck North and SC in the middle of September and closed thousands of businesses.

Economists say there is no indication the labor market is expected to weaken anytime soon.

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The claims data has no bearing on September's NFP report, which is scheduled for release Friday. "Real wage growth has been consistently hovering around zero". Weather-related absences and curtailments also took a toll on the tally of aggregate hours worked. Households are saving almost 7 percent of their incomes - more than twice the savings rate before the recession.

The labor force participation rate is still low compared to historic averages. Hiring data may show storm- related swings for October too, economists said. In 2018 so far, manufacturing has added 278,000 jobs.

That run has added almost 20 million people to the nation's payrolls since the Great Recession, which cost almost 9 million their jobs. As more slack is squeezed out of the labor market, economists expect annual wage growth to hit 3 percent. "The standard measures just don't reflect those increases well, if at all". The annual advance of 2.8% followed a 2.9% gain in August. But the hurricane could have cut the workweek and lifted wages as it probably kept workers in the low-paying restaurant and retail industries temporarily at home.

Many forecasters believe it will decline even more in the months to come. And if it has, will a shortage of workers compel businesses to raise pay quickly and sharply?

Meanwhile, the labor market faces other challenges.

The U-6, or underemployment rate, rose to 7.5% from 7.4%. However, there was an increase in the number of people working part-time who want full-time work.

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